A mining approach to sustainability

The prosperity of South Africa is inseparably linked to the sustainability of our world-class mining sector which contributes almost one fifth of the country’s GDP. Given the wealth of South Africa’s mineral resources, it is a sector that holds much promise, as well as the expectations of thousands of unemployed citizens. However it is also a sector facing enormous challenges. From environmental issues such as climate change and water, stricter regulatory environments, ageing infrastructure and new technological advancements to industrial relations unrest, social development demands and economic downturns, the challenges are vast. In any business or sector, short-term factors often grab the headlines. At Exxaro, we believe that it is the long-term trends that will produce a different world in 2030 and beyond. Hence, it is the long-term considerations that shape our thinking.

Our business philosophy recognises that Exxaro exists within the context of a society which expects a net positive benefit from its activities and therefore the company has a contribution to make in the development of this society. What is also key to this philosophy are the strategic objectives which drive our sustainable development goals. Therefore Exxaro’s business development and growth efforts balance a portfolio of social, environment and economic objectives. Mining is critical to stimulating economic activity and we foresee Exxaro’s investment activities making an even greater impact on the country’s socio-economic development goals.

Our approach to sustainability is guided by global best practice on sustainability and is contextualised further by formal charters that define our goals and commitment to stakeholders. These charters are guided by South African legislation, King (III) recommendations on corporate governance, the JSE Socially Responsible Investment (SRI) Index requirements and international benchmarks such as the Global Reporting Initiative (GRI), the United Nations Global Compact, and the International Council on Mining and Metals.

For Exxaro, sustainability is a journey. We recognise that sustainability is an important element in ensuring the future is secured for every one of our stakeholders. The concept of sustainability and implementation of its constituent parts are integral to both our strategy and the way we measure the performance of our people.

In implementing our approach to sustainability, Exxaro is guided by the five-capitals model — a well-documented sustainability framework used globally. This framework is tailored to the nature of our business and the needs of our stakeholders. The model uses a tiered approach where successive foundational layers need to be put in place to support Exxaro’s strategy and ensure its sustainability. The figure below illustrates the following:

  • Cross-functional, integrated and tiered
  • The ultimate aim of the framework is to add value
  • Focus on the issues most material to Exxaro across the capitals.

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Compliance and governance
In a tightly regulated industry within a developing democracy, our licence to operate is multifaceted — extending from corporate governance to social and environmental performance. The legal universe Exxaro operates in has been mapped and over 2 700 legal requirements govern mining across all economic, social and governance domains. Good governance is therefore crucial to our sustainability.

 

Risks and material issues
The next tier to address are risks and material issues. In practice, this runs in parallel with compliance requirements. Exxaro’s risks are spread across the sustainability spectrum, and in 2013 Exxaro successfully implemented a world-class enterprise risk management process across the organisation.

 

Value added through the sustainability approach
The value added to the business and stakeholders differs across the sustainability spectrum, and is both quantitative as well as qualitative. We add value because our sustainability approach extends beyond maintaining the organisation to development through growth, and playing a responsible role in society. Compliance to both the mining charter and Department of Trade and Industry (DTI) codes enables Exxaro to add value, using a bottom-up approach to developing opportunities for empowerment.

Additional value is derived from reduced and avoided costs, better risk management, greater responsiveness in volatile markets and investor security, lower costs of compliance, improved reputation with key stakeholders and greater influence with regulators, a stronger brand, greater customer loyalty, lower cost of capital and most importantly, the improved wellbeing of our communities.

 

Opportunities
To ensure Exxaro’s future economic sustainability, it is important to identify opportunities to anticipate and create the future in innovative ways. To support this drive Exxaro has a formalised its NEXT (New Exxaro Tomorrow) programme, among many other initiatives.

 

Integrated reporting
Integrated reporting for Exxaro is about constantly reassessing our framework and ensuring we measure the right performance indicators and manage them appropriately. Exxaro’s key sustainability performance indicators are guided by best practice as determined by GRI, but also interface with measurable indicators on key risks, compliance requirements, and any action or issue that will enhance the reputation of our organisation. Understanding that scientifically determined business risks will not always dovetail neatly with issues stakeholders consider important, each year we select the most appropriate combination of indicators for external assurance — based on materiality to the business strategy and as an external verification of continual improvement. Our strategy is to move from retroactive reporting to pro-active reporting in the next few years.

Through our sustainability efforts we believe that we are securing the future. Our aim is to harmonise business, community and environmental needs and obligations to enable the company to achieve its founding goal of being a company that makes a positive social and economic contribution to South Africa. We strive to understand the collective factors that either threaten or help create our long-term value, growth and contribution to society and managing our responses appropriately.